Market Update

This week has pretty much been the week of Central Banks, with Rate Decisions from Australia, Canada, Poland, & The ECB today. First up on Tuesday was The Reserve Bank of Australia, keeping their Interest Rates at 0.10%, however more importantly forward guidance suggested they would begin their asset tapering with the aim of drawing down the program by February 2022.

The Bank of Canada also kept it’s interest rates at 0.25%, with concerns around their fourth Covid wave as well as supply issues weighing down on this decision. The Bank of Canada expect the economy to strengthen throughout the second half of the year but are reluctant to shift from current rate positions until at least the second half of 2022 with the economy contracting at an annual rate of 1.1%. As with most economies, the employment picture is will be the biggest influence for when rates can be increased and Fridays employment figures release will be watched with intensity.

This now brings into play The European Central Banks meeting today, scheduled for 1:30pm. It’s widely expected that the current printing of €80billion, under the Pandemic Emergency Purchase Program will be reduced to a monthly figure of €60 billion before a further reduction in February 2022 before drawing the program to a complete close a month later. There are suggestions however that once this Covid Emergency Program draws to a close in March that the conventional monetary policy will continue a little longer to navigate any further waves of Covid. It could well be that we simply see a policy change with certain conditions in place, which could potentially strengthen The Euro slightly.

Across the pond in The U.S., as with many, the focus has been on the jobs market. With Non-Farm Payrolls falling incredibly short of expectations, all the talk right now is about The Fed Reserve potentially delaying it’s withdrawal of support. Thursday again brings weekly jobless claims. Earlier this week it was mentioned that 9m jobless in The U.S have lost their unemployment benefits so what impact this has on The U.S market will more than likely be felt in the coming weeks and will no doubt weigh down on the safe haven currency.

There shouldn’t be any real surprises with the majority of Central Banks decisions, with main focuses scrutinising the jobs market moving forward along with supply concerns that we all seem to be experiencing right now. It should be taken into consideration however that any decision or comments that indicate a change in mentality will of course affect the exchange rates for GBP, USD, EUR & CAD.

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